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. Last Updated: 07/27/2016

3 Countries Strike Deal on $900M Balkan Pipe

SOFIA, Bulgaria -- Russia, Bulgaria and Greece signed a preliminary agreement to build a pipeline that will help relieve congestion in Turkey's Bosporus strait, which is clogged with tankers carrying Russian crude oil from the Black Sea.

The 285-kilometer pipeline will run from the Bulgarian Black Sea port of Burgas to the Greek port of Alexandroupolis on the Aegean Sea. It will cost about $910 million. Its capacity is estimated at 35 million tons of crude oil per year initially, which could be raised to 50 million tons later.

"The agreement aims to determine the forms of cooperation between the three countries," the Bulgarian Ministry of Regional Development and Public Works said in a statement Wednesday.

The agreement was signed in Burgas on Wednesday by Andrei Dementyev, Russian deputy industry and energy minister; Kalin Rogachev, Bulgaria's deputy minister of regional development and public works; and Nikos Stefanou, the secretary general of the Greek Ministry of Development.

The signing comes seven days after President Vladimir Putin urged Bulgaria and Greece to speed up talks on the pipeline or lose their chance to transport Russian crude.

Russia ships oil from ports on the Black Sea through Turkey's Bosporus and Dardanelles straits to the Mediterranean. To alleviate congestion in the straits, Turkish authorities barred tankers longer than 200 meters from sailing through the straits at night.

Fewer daylight hours in the winter limit the number of ships that can use the waterways, and bad weather can clog them further.

"With today's agreement, the way opens, after 14 years, to build the pipeline," Greek Development Minister Dimitris Sioufas said in a statement in Athens on Wednesday. "This will significantly contribute to the decongestion of the Bosporus straits."

Russia will get a 51 percent stake in The International Project Co., the company owning the pipeline, the statement said.

Gazprom Neft formed a group with state-run oil company Rosneft and state pipeline operator Transneft to hold Russia's stake in the project. Bulgaria and Greece will each hold 24.5 percent, according to the statement.

The Bulgarian stake will be held by Burgas-Alexandroupolis Oil Pipeline Project Co. and the Greek stake by Hellenic Petroleum.

Construction may begin in 2008 and be completed by 2011, Stefanou said in a separate statement.

"There are several unresolved issues which have yet to be negotiated," Nedezhda Semerdjieva, a press officer at Bulgaria's Ministry of Regional Development said Wednesday. "Ownership of the pipeline entries and the adjoining oil terminals at both ends is a major item of contention."

Bulgaria will gain $35 million per year in transit fees from the pipeline, of which 155 kilometers pass through Bulgaria, she said.

Russia suggested earlier that Kazakhstan, the second-largest oil producer in the former Soviet Union, could also join as an equity partner in the project.

The project is competing with a $1.2 billion, 895-kilometer pipeline project linking Burgas with the Albanian port of Vlore and passing through Macedonia. It is managed by the U.S.-registered Albanian Macedonian Bulgarian Oil.